Does the Merger-Related Legislation in the Nation of the M&A Target Company Affect the Probability of the Pre-Merger Deal Failure?
Logit model Mediator and Moderator Analysis
Diploma Thesis 2016 55 Pages
Table of contents
List of Tables
List of Figures
List of Acronyms
2 Literature Review
3 Merger Regulation
3.1 Antitrust Laws in the USA
3.1.1 The Sherman Act
3.1.2 The Federal Trade Commission Act
3.1.3 The Clayton Act
3.1.4 Federal Trade Commission Cases and Proceedings
3.2 Merger Regulation in the EU
3.2.1 Criteria for the EU Merger Regulation to Apply
3.2.2 The EU Merger Regulation Notification, Investigation and Penalties
3.2.3 The EU Merger Regulation Statistics
3.3 Comparison of the EU and US Merger Control Mechanisms
4 Takeover Defense Tactics
4.1 Dual-class Shares
4.3 Poison Pills
4.4 Golden Parachute
4.5 Staggered Board Amendments
4.7 Comparison of the US, UK and Dutch Defense Tactics
5 Hypotheses Formulation
6 Logit Model Analysis
6.1.1 Basic Assumptions of the Logit Model
6.2 Data Structure and Model Variables
6.2.1 The Dependent and Independent Variables
6.2.2 The Mediator Variables
6.2.3 The Moderator Variable
6.2.4 Descriptive Statistics
6.3 Logistic Regression Analysis
6.3.1 Hypothesis Testing
7 Robustness Test: Probit Model Analysis
8 Conclusion and Discussion
Appendix A: EU Merger Regulation Thresholds
List of Tables
Table 1: The Main Provisions of the US Antitrust Laws
Table 2: The Summary of Federal Trade Commission Law Enforcement Cases
Table 3: The Summary of EU Merger Regulation Decisions
Table 4: The Use of the Popular Takeover Defense Strategies (Ranking System)
Table 5: The Government Effectiveness Indicator Values for the US, UK and NL
Table 6: Descriptive Statistics
Table 7: The Summary of Mediation Models
Table 8: The Probit - Logit Comparison of Regression Coefficients
List of Figures
Figure 1: Comparison of the US and the EU Merger Regulation Restrictiveness
Figure 2: Necessary Conditions for a Variable to be a Mediator
List of Acronyms
illustration not visible in this excerpt
Abstract The paper examines the relationship between the nation of an M&A transaction’s target company and the probability of deal completion/ pre-merger failure based on a sample of transactions proposed by Dutch bidders during the period ranging from 2003 to 2015 with other Dutch companies; British (UK); or American (US) targets. By the logistic regression analysis, the US-targeted deals were found to be associated with higher probabilities of pre-merger failure which is aimed to be explained by applying a mediation analysis of several country-specific indicators potentially affecting the deal completion. This way, four factors which are addressed in the theoretical part of the paper (including the restrictiveness of the merger control mechanisms, effectiveness of corporate-related legislation and the time and complexity of contract enforcement) were found to be the mediators of the relationship between the target nation and pre-merger failure. Additionally, according to the regression results, transactions conducted during the end of a merger wave are expected to be less likely completed than the ones negotiated in the earlier or later stages, regardless of the target nation.
Keywords merger control, deal completion
Companies engaging in mergers and acquisitions (M&A) spent more than USD 3.8 trillion on their deals in 2015, exceeding the previous record amount of money invested in such activities set in 2007. Currently, high numbers of firms worldwide seem to be more confident and optimistic about pursuing M&A than they were in the last few years following the financial crisis of 2008. This trend resembles the six merger waves that occurred over the last 120 years (Baigorri, 2016). Porzio (2015) has suggested that favorable conditions for M&A transactions are nowadays present almost in the whole US economy, regardless of sector or industry, and that they have occurred as a combination of high consumer and management confidence, and low interest rates. Such environment is not expected to change rapidly in the near future and hence the amount of M&A deals involving US companies is assumed to continue growing. Similarly, positive macroeconomic, financial and investment conditions encouraging M&A activity can be observed in the EU. According to Corte and Horbach (2015), the confidence of European companies has been resumed after the economic crisis due to the combined effect of improved methods of financing, high levels of cash reserves on corporate financial statements, rising levels of investment returns, and strong equity market performance allowing publicly listed bidders to pay in stock for their takeovers and thus benefit from using such payment method. Based on these factors, M&A activity is expected to remain important for the global economic development in the upcoming years (Yoon, 2015).
Generally, companies have various reasons for conducting mergers and acquisitions. To mention some of them, Sudarsanam (2003) finds that firms are mostly motivated by potential benefits resulting from the transaction in a form of financial gains (acquiring an undervalued or poorly managed company which can be restructured, healed and then resold with a premium), strategic market advantage (increasing market share and power, or taking control over firms attractive for competitors), diversification, and internal pressures from management and corporate executives either being concerned about the company’s reputation leading them to follow the others’ M&A decisions (“following the crowd”), or being self-interested and overconfidently aiming to leave a legacy or boost their own egos with a specific deal. Other authors see the drivers of M&A transactions in the globalization and the increased competition in both domestic and international markets linked to it (Zuhairy et al., 2015), or in the access to new technologies, know-how or scarce resources (Motis, 2007). Since all of these motives currently lead an increasing amount of companies that engage in M&A activities (instead of using some other market entry modes), interact with others internationally and spend billions of US dollars in mutual deals, this field seems to be highly relevant for the current global economy and thus worth studying within the scope of this paper.
Regardless of the motives behind M&A, the companies conducting such transactions usually share one common objective which is delivering positive value to shareholders. However, according to the current literature, between 70% and 90% of the deals actually fail to create expected synergies and shareholder value (McMorris, 2015). According to the literature reviewed on this topic, the reasons why the companies do not succeed in reaching their merger-related goals often include differences between the involved parties regarding e.g. corporate culture, management structure and habits, business strategy or long-term objectives. This in turn leads to an unsuccessful post-merger integration of the firms. While there are plenty of papers and publications analyzing the success or failure of M&A deals from the post-merger perspective and focusing on the ability of the companies to create and deliver value to their shareholders along with achieving the expected synergies, there is little amount of literature studying the topic from the pre-merger point of view. Despite the record figure for the volume of M&A deals completed recently, in 2015, there has been more than 25% of the total number of proposed transactions that failed during the pre-merger period, i.e. before they were even finalized (Zephyr and World Bank, 2016). Since such incompletion (withdrawal or prohibition) of a proposed deal is usually accompanied by high fees and losses for the bidder harming the company and its shareholders, this study aims to examine some of the factors assumed to affect the pre-merger M&A failure in detail and help the companies avoid the costly pre-merger deal incompletion.
Thus, the main purpose of the present paper is to uncover and empirically analyze some of the reasons why some mergers or acquisitions fail to be completed and others do not. Based on the literature reviewed on this topic, the most commonly discussed factors have been the legislative, administrative and business environments linked to the nation of the M&A target company. While several country-specific factors were addressed by the authors (such as merger regulation mechanisms, popularity and legality of various takeover defense strategies, complexity of governmental corporate-related legislation or time-demand of contract administration and enforcement), the proposed relationship between specific target nations and the pre-merger failure rate has not been tested empirically by any of them. This paper combines the theoretical description of the relevant country-specific characteristics of the merger-related legislation present in the target nation with an econometric logit model analysis designed to test whether the relationships assumed by the studied literature hold after application of the real-life data.
More specifically, M&A deals proposed by Dutch companies with their most common deal partners or targets, namely British, American, or other Dutch firms are examined. Another reason for choosing these nations for the analysis is that they represent the 3 most important players in the global M&A activity based on the amount and volume of transactions made, and hence there is also enough data available regarding the deals and their completion/ pre-merger failure. The time period examined by the analysis spans from 2003 to 2015 in order to cover three groups of data: (1) the sixth merger wave (2003 - 2008) which is expected to affect the pre- merger deal failure according to the studied literature, (2) the most recent M&A activity (2014 - 2015) which is considered to be an upward-sloping part of a potential seventh merger wave, and (3) the years between these two periods as a reference period of time when deal-making is not affected by any merger wave. In order to find an answer to the primary research question stated as “Does the merger-related legislation in the nation of the M&A target company affect the probability of the pre-merger deal failure?”, each target nation in the sample of this paper is described by variables corresponding to the restrictiveness of the merger regulation (percentage of penalized or rejected deals in the total amount of deals), effectiveness of the government legislation and time and number of procedures needed for companies to finalize and inforce contracts. Additionally, testing the relationship between the fact that a transaction is being negotiated during the end of a merger wave (when there is a high amount of deterrent examples of deals failed during the earlier stages of the wave) and the probability of successful completion of such a deal is also part of the empirical analysis.
Since the importance and amount of money involved in the field of M&A seem to be on their continuous increase, an empirical analysis of the factors, more specifically the regulation-related characteristics of the target nation, affecting the probability of a deal’s pre-merger failure can represent a valuable contribution to the field. This paper aims not only to extend the current literature on this topic (which is mainly focused on post-merger failures) but also provide companies that consider engaging in M&A transactions with an empirical study suggesting what kind of country-specific factors are estimated to positively or negatively influence the likelihood of the deal completion. Such factors are then important to be inspected while choosing a suitable target company for an M&A activity. Since the present paper is based on the analysis of the transactions proposed by Dutch bidders, it is expected to be relevant especially for companies operating in the Netherlands which have been investing the world highest amount of money in M&A deals relative to the country’s GDP over the last few years (Zephyr, 2016). In addition, as some authors claim that the global economy is moving towards the top of a seventh merger wave (Lam, 2016), it is found relevant to examine the effect of the later stage of a merger wave (using the data from the sixth wave) on the probability of a deal completion that might be applicable on the current deal-making. This is also one of the unique features of this study by which it aims to contribute to the existing research and literature.
In the following section, a literature review regarding the main factors expected to affect the pre- merger M&A deal failure is provided. In Section 3, the focus is put on the most commonly discussed one, the merger control and regulation mechanisms in the EU and the US. In that part of the paper the two legislations are summarized and compared according to the levels of restrictiveness later used for the empirical analysis. An in-depth explanation and comparison of the two merger regulation systems is provided in order to help the reader understand the differences between the two regulatory regimes and the reasons why they can influence the probability of pre-merger M&A deal failure. Section 4 provides an overview of the popularity and use of the takeover defense strategies as a part of the country-specific merger control mechanisms since the literature review suggested that countries with higher legal allowance of such tactics are expected to experience significantly higher pre-merger failure rate. In Section 5, the hypotheses for the empirical analysis of this paper are stated. Sections 6 and 7 are then related to the logit model analysis of the proposed hypotheses and the robustness test in a form of a probit regression. Finally, Section 8 summarized the results and conclusions drawn from the empirical part of the paper and suggests potential areas of further research.
2 Literature Review
In the literature studied on the topic of the pre-merger M&A completion, a few major reasons for the transactions to fail in this stage of the deal-making process were discussed. Reis et al. (2013) addressed cross-border deals and found that cultural differences in corporate and social behavior and habits may make the pre-completion stage of negotiation and deal finalization difficult or even impossible. Manchin (2004) suggests that the level of M&A deal completion between the European and US companies is lower than in the case of transactions conducted within the EU. The author claims that this fact may be affected by various macroeconomic, legislative and institutional aspects characteristic for each of the involved countries. Such factors include e.g. the regulatory environment, contract enforcement mechanisms, market for corporate control, or quality and efficiency of the governmental institutions.
The purpose of this paper is to analyze how the nationality of the target company and the legislative system linked to it affect the probability that the deal will fail during the pre-merger stage. In order to do so, a few aspects characterizing the target nation (and being expected to have an effect on the deal completion) are identified. First, the level of merger control in a nation of the target has been discussed as an important factor. Although only few deals have been prohibited as a result of the merger regulation in the EU or the USA compared to the total amount of deals completed, the potential restrictions or compliance requirements set by the regulatory authorities can still deter significant amount of companies from proceeding with the proposed M&A transactions. Phillips (2013) has addressed the fact that strict rules passed by the US Federal Trade Commission requiring pharmaceutical companies to notify antitrust authorities when they aim to conduct any kind of M&A, or e.g. just acquire an exclusive patent license, are observed to result in a relatively high amount of deal withdrawals among drug and biotech companies. According to De Loecker et al. (2008) and Tsang (2015), similar deterrent effects of the merger regulation requirements can be also noticed in industries including tobacco, petroleum products or transportation (specifically railroads or airspace) in the USA. In addition, companies sometimes back out of their planned M&A activities during the pre-merger stage because of two factors: (1) the severity and nature (criminal or civil) of the penalties issued to them in case they would fail to comply with an order received from the regulatory authority, and (2) the extent of the potential remedial actions required to proceed with the deal. It has been observed that a threat of criminal penalties discourages more anticompetitive transactions from their completion than civil penalties (Peitz and Spiegel, 2014). The logit model analysis in Section 6 aims to estimate the effect of the restrictiveness of merger regulation in the three key players in the world M&A deals (the USA, the United Kingdom and the Netherlands) on the probability of pre- merger transaction failure taking into account the number of deals penalized and prohibited by each of the regulatory legislations.
Also connected to the merger control legislation, the success or failure of an M&A deal finalization process is assumed to be affected by the legality and popularity of takeover defense strategies used in the nation of the target company since these practices are designed to prevent unwanted takeovers and mergers from being completed (Pearce and Robinson, 2004). Gandel (2014) claims that the tactics, such as poison pills or staggered board membership, have been highly relevant and key defense tools used by target companies to block offers during the pre- merger negotiation stage of the deal-making process. According to Mason (2016), the popularity of takeover defense strategies (including golden parachutes, dual-class stock structure, employee share ownership plans or greenmailing) has significantly increased during the last 20 years and even though they are allowed by the government and regulatory authorities in an effort to help companies safeguard the rights and interests of their shareholders in case of a hostile takeover threat, such tactics are often used by the target’s management for purely self-motivated reasons to block all kinds of deals, even those potentially beneficial for the shareholders. As stressed by Sundaramurthy (2000), the defense strategies seem not only to raise barriers to finalization of transactions that are already being negotiated (leading to the pre-merger M&A deal failure) but also to deter potential acquirers from initiating a bid. The theoretical part of the paper addresses primarily the potential effects of the use of the takeover defense tactics on the deal completion, and compares the popularity and legality of such strategies within the studied countries. However, because of the lack of data regarding the use of takeover defense in each of the countries and each year of the examined time period, this factor is not included in the empirical analysis.
In addition to the country-specific merger regulation and control mechanisms discussed above, Phillips (2013) argues that a complex government policy regarding corporate activities that is difficult to understand and apply can also deter companies engaging in M&A deals from finalizing the transactions. Using the example of unclear changes in rules passed by the Federal Trade Commission of the USA with respect to the notification requirements applicable for pharmaceutical companies in 2013, the author claims that vague interpretation of regulatory policies along with their excessive complexity can have a negative effect on the completion of the deals being negotiated. Regarding the policy complexity, Smith (2003) has claimed that for some companies, a short time needed to finalize contract with another firm and receive decision, such as unconditional clearance or conditions required for clearance, from the regulatory authority is very important, especially in cases when the deal has to be completed as soon as possible in order to achieve proposed strategic objectives with time-limited validity. In this sense, a complicated merger and competition law and contract enforcement can delay takeovers so much that they are withdrawn during the pre-merger period since the opportunity costs of the companies waiting for the regulatory decision are higher than expected benefits from the merger (UKSA, 2016).
Lastly, a few authors have addressed the relationship between the occurrence of merger waves and pre-merger deal withdrawals. Gaugham (2015) has stated that these waves, short periods of very intense merger activity, start when there is a high amount of potentially attractive target companies in the market and they usually end with a burst of an economic bubble which led to such abundance of M&A deals in the first place. Thus, at the top of the merger wave, more deals are expected to fail during the pre-merger deal-making period since a noticeable number of companies back out of the deals once they see a lot of unsuccessful deals that were completed at the beginning of the wave but did not manage to achieve expected synergies and shareholder value creation. This trend has been observed mainly in the USA. According to Galli and Pelkmans (2000), towards the end of the merger wave, not only companies observe the deterrent examples of deals completed at an earlier stage of the wave (eventually with an undesirable outcome) but also the merger control and antitrust authorities learn their lesson from these cases in a form of stricter merger regulation enforcement that in turn results in more deals penalized or prohibited increasing the probability of the pre-merger M&A failure.
Besides the above listed factors (namely the level of restrictiveness of the merger control, the use of takeover defense strategies, understandable and effective government policies, and fast and uncomplicated enforcement of contracts), there are many other reasons why M&A deals fail before they are even finalized, e.g. the executive management’s hubris, over-confidence or overoptimism which leads them to proceed with their bid despite the fact that the merger regulation or the allowed takeover defense tactics might make the deal impossible to finish. Such companies are often even willing to take the risk of paying high penalties if the deal is not completed (Sudarsanam, 2003). However, such factors are hardly observable and measurable and thus, for the purpose of this paper, they are not included in the empirical model.
The next two sections describe the merger regulation legislation and mechanisms effective in the USA and the EU along with the legality and use of the takeover defense strategies most commonly discussed in the examined literature. This way the reader is aimed to be provided with a sufficient in-depth overview of the topic of merger control for an easier understanding of the relationships tested by the empirical analysis.
3 Merger Regulation
3.1 Antitrust Laws in the USA
Since 1890, the United States Congress has passed three antitrust laws, namely the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. After some revisions and amendments, all of them are currently still in effect. The main purpose of the US antitrust laws is to prohibit unlawful mergers, acquisitions and business practices in general. In order to spot and inspect such transactions, the laws have set fundamental rules and benchmarks for fair competition within firms whose activities and operations are in any way affecting the US economy. Since the antitrust laws define unlawful M&A and business practices in relatively general terms, the authorized courts then have to decide which of the transactions and activities are illegal based on the specific characteristics of each case. Yet, the basic objective of the law does not change. Every antitrust legal proceeding aims to protect competition in the relevant market for the customers’ benefit, making sure that businesses have strong incentives to operate efficiently and keep quality of their products up without increasing their prices (Federal Trade Commission, 2016). Table 1 summarizes the most important provisions of the three antitrust laws and their amendments. All of them are described below more in detail.
3.1.1 The Sherman Act
This antitrust law states that “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the United States, or with foreign nations, is declared to be illegal” as well as an “attempt to monopolize, combine or conspire with any other person or persons [corporations or associations by the laws of the United States or any foreign country] to monopolize any part of the trade or commerce among the United States, or with foreign nations” (Legal Information Institute, 2016). Although the interpretation of the law by the courts might differ (potentially leading to declaring agreements lawful even if they restrain trade), certain acts are perceived to harm competition so seriously that they are declared illegal in vast majority of cases. Such acts include, among others, intentional bid rigging (promising a commercial contract to one party even though several other parties present a bid as well), market division within a few major players, or plain arrangements between competing businesses to fix prices.
The violation of the Sherman Act is usually penalized financially but can also result in imprisonment as the Act is the only US antitrust statute which carries criminal penalties because it is both civil and criminal law. The size of the criminal penalties for intentional and clear violations of the law (such as bid rigging or price fixing) is one of the few changes that have been made since its implementation in 1890. As amended in the original version of the Act, the unlawful activities restraining or monopolizing trade “shall be punished by fine not exceeding USD 10 million if a corporation, or USD 350 thousand if any other person, or by imprisonment not exceeding three years” (Legal Information Institute, 2016). In June 22, 2004, the maximum fines for corporations increased to USD 100 million and for individuals to USD 1 million, along with up to 10 years in prison. In addition, under federal law, the maximum level of the penalty for corporations can reach up to twice the amount the cooperating companies gained from the unlawful activity or twice the money lost by the victims, if either figure exceeds USD 100 million (Federal Trade Commission, 2016). As mentioned by Peitz and Spiegel (2014), such changes in the penalization of the illegal cooperation activities among companies might lead to the increase in the probability that a given M&A deal would not be successfully finalized since the companies might be threatened by the law and withdraw from the transaction. The empirical analysis in Section 6 is focused on the relationship between the merger regulation in the target’s nation and the M&A deal completion in detail.
Table 1: The Main Provisions of the US Antitrust Laws
Abbildung in dieser Leseprobe nicht enthalten
With regard to the cross-border M&A, a “strict territorial interpretation” was originally used by courts when applying the Sherman Act to foreign conduct, i.e. they were looking exclusively at the laws of the locality where the anticompetitive activity occurred. This approach was, however, replaced by an “effect test” in 1945 which stated that “any state may impose liabilities … for conduct outside its borders that has consequences within its borders which the state reprehends” (Becker and Kirtland, 2003). Thus since then, the American merger regulations apply directly not only to the companies operating in the USA making deals among each other, but also to the firms based outside the USA entering the American market, strengthening their positions there or affecting the nature and competitiveness of the market (including import and export) in any other way.
3.1.2 The Federal Trade Commission Act
All violations of the Sherman Act are according to the Supreme Court of the United States also outside the law stated in the Federal Trade Commission Act which aims to define and ban unfair methods of competition and deceptive acts or business practices. Under the Act from 1914, the Commission is empowered to seek monetary compensation or any other relief for activities detrimental to customers and market competition; introduce trade regulation rules specifically defining unfair and deceptive practices along with establishing clear requirements to prevent such activities; conduct investigations related to the entities suspected of the unlawful practices; and make public releases and legislative recommendations to the Congress to improve the antitrust law system. In addition to covering majority of the activities that already violate the Sherman Act, the Federal Trade Commission Act also reaches some other practices (harming fair competition) which do not clearly fit into the rules of conduct formally prohibited by the Sherman Act, thus the legislation addresses and inspects wider range of transactions affecting the American market (Federal Trade Commission, 2016).
3.1.3 The Clayton Act
Together with its amendments (Robinson-Patman Act, Celler-Kefauver Act and Hart-Scott- Rodino Act), the Clayton Act defines and forbids such activities as price discrimination (including rebates and discounts), specific mergers and interlocking directorates (when the same person makes decisions for competing companies), tying arrangements (when the seller conditions the sale of one product on the buyer’s agreement to purchase a separate product from the seller), and exclusive dealing or boycotts. The three amendments to the Clayton Act have noticeably affected the scope and nature of the US antitrust law. In 1936, the Robinson-Patman Act banned certain discriminatory price settings and allowances in dealings between companies. However, the effect of this amendment has diminished since both the Department of Justice and the Federal Trade Commission have rarely enforced the Act since it became effective (Lin et al., 2000).
In 1950, Section 7 of the Clayton Act was amended by the Celler-Kefauver Antimerger Act prohibiting M&A which might result in substantial lessening of the competition or tend to create a monopoly. Prior to this amendment, many firms were able to get around the original version of the Clayton Act by making use of the fact that asset transactions among competitors were not illegal even though stock deals were. This way the Celler-Kefauver Act aimed to capture more M&A activities that would lead to explicit or tacit collusion (caused by increased market concentration) making the US antimerger law stricter than it had been before (Federal Trade Commission, 2016).
In 1976, the Hart-Scott-Rodino Antitrust Improvements Act brought new obligatory requirements for companies planning large M&A to notify the government in advance about the purpose, expected execution and impact of their plans. Since either the Department of Justice or the Federal Trade Commission acquired the responsibility to formally review the potential mergers, the role of these institutions became significantly more important with respect to the antitrust law enforcement affecting the chance that a company‘s proposed merger would not be approved (Lin et al., 2000). Additionally, the agencies’ role in the US antitrust policy changed from the one based on law enforcement to one based on regulation. As a result, the importance of their Joint Merger Guidelines outlining the principal analytical techniques, practices and enforcement policy with respect to both horizontal and non-horizontal (vertical and conglomerate) M&A naturally increased as well (Coate and Kleit, 1996). As suggested by the US General Accounting Office (1990), the new law after the Hart-Scott-Rodino amendment had a significant impact on the process how specific cases attracted attention of the two enforcement bodies. Since until 1978, the Antitrust Division of the Office was notified about potentially unlawful mergers through complaints of attorneys, citizen information, or trade press reports, it was relatively difficult for them to investigate proposed mergers completely before they were finalized. However, the “premerger notification program” becoming effective in 1978 as part of the Hart-Scott-Rodino Act led to a noticeable increase in the number of cases investigated by the regulatory bodies (Lin et al., 2000).
3.1.4 Federal Trade Commission Cases and Proceedings
As discussed above, one of the Commission’s fundamental missions is to promote fair competition in the American market. In order to do so, the authority enforces federal antitrust laws that prohibit anticompetitive M&A and other business practices potentially leading to higher prices, narrower variety of products, or less innovation (Federal Trade Commission, 2016). Even though the Commission also enforces federal consumer protection laws that aim to prevent fraud, deception and unfair practices of companies with respect to the customer welfare, this section of the paper deals exclusively with the enforcement mechanisms linked to the cases addressing antitrust issues. These cases are the most relevant for the empirical analysis presented in Section 6 since they reflect (un)fair competition between market participants responding to their mutual transactions and cooperation in form of M&A. The effects of these cases’ enforcement proceedings (orders and penalties issued by the Commission) on the probability of M&A’s failure during the pre-merger stage are tested by the logit model analysis. In this part of the paper, the Commission’s enforcement practices are briefly summarized and described.
Table 2 contains the amounts of cases that were subject to one of the Commission’s types of the antitrust law enforcements. These are sorted into four main categories - namely the consent agreements, federal injunctions, administrative complaints, and civil penalties. The table includes data for the years spanning from 2003 to the end of 2008, corresponding to the sixth merger wave, compared to the period from 2014 to the end of 2015, reflecting the most recent M&A activity at the time of writing this paper (and addressed by several authors as the upward-sloping part of the seventh merger wave). In addition, the percentage shares of the enforcement cases(that brought any kind of commitments or liabilities to the companies proposing the deal) out ofthe total amounts of cases inspected by the authority per each of the examined years are indicatedin the table. All the percentage values were computed by the author of this paper in order tocreate an indicator of the US merger-related regulation’s restrictiveness.